Invalid re-assessment under Income Tax Act; Return filed, proceedings unsustainable. Order quashed, appeal allowed.

The Tribunal held that the initiation of re-assessment proceedings under Section 148 of the Income Tax Act was invalid as the basis for reopening the assessment was incorrect. The Tribunal found that the appellant had indeed filed the return, rendering the proceedings unsustainable. Consequently, the proceedings and the order making additions under Section 143(3) read with Section 147 of the Act were quashed, and the appeal of the assessee was allowed.

---

---

Issues Involved:
1. Initiation of re-assessment proceedings under Section 148 of the Income Tax Act.
2. Recording of reasons for re-assessment and the validity of the consequential order under Section 143(3) read with Section 147 of the Act.

Summary:

1. Initiation of Re-assessment Proceedings under Section 148:
The appellant challenged the initiation of re-assessment proceedings under Section 148 of the Income Tax Act, arguing that the authorities lacked jurisdiction. The case was reopened based on information that the appellant had transferred Rs. 7 Lakhs, deposited Rs. 30,01,000/- in HDFC Bank, Rs. 28,00,000/- in Kotak Mahindra Bank, and purchased immovable property for Rs. 1,27,00,000/- during the assessment year 2013-14. The ITO recorded reasons for reopening the assessment on 19.04.2016, citing non-filing of the return by the appellant.

2. Recording of Reasons and Validity of Consequential Order:
The appellant contended that the main basis for reopening the assessment was incorrect, as the return of income for the assessment year 2013-14 was filed on 10.01.2015. The Tribunal found that the very basis of reopening the assessment was wrong since the return was indeed filed, which vitiated the entire proceedings. The Tribunal relied on the judgments of the Hon'ble Jurisdictional High Court in Sagar Enterprises vs. ACIT and the Hon'ble Delhi High Court in Deepak Wadhwa vs. ACIT, which held that incorrect reasons for reopening an assessment render the proceedings unsustainable.

Conclusion:
The Tribunal concluded that the initiation of proceedings by recording reasons dated 19.04.2016 by the ITO, based on the incorrect fact of non-filing of the return, was bad in law. Consequently, the entire proceeding and the order making additions under Section 143(3) read with Section 147 of the Act were quashed. The appeal of the assessee was allowed.

Order Pronounced on 12/07/2023.

---